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Results for the six months ended 30 June 2008

Cambridge, UK and Cambridge, Massachusetts - 7 August 2008 - Acambis plc (Acambis) (LSE: ACM) announces its results for the six months ended 30 June 2008.  

Key events of the six months to 30 June 2008:

§         £40m (net of expenses) raised through over-subscribed Placing and Open Offer
§         $425m, ten-year ACAM2000^® smallpox vaccine contract awarded to Acambis by US Government
§         Pipeline highlights

Key events since the end of the period:

Financial results for six months ended 30 June 2008:

	Six months ended  30 June
	2008	2007
Revenue	£8.8m	£3.4m
Operating loss (before restructuring costs)	£(12.1)m	£(16.2)m
Loss before tax	£(12.2)m	£(19.3)m
Basic loss per share	(10.6)p	(18.2)p
Cash	£49.6m	£30.8m

Enquiries:

Acambis plc 

Ian Garland, Chief Executive Officer

Elizabeth Jones, Chief Financial Officer

Lyndsay Wright, VP, Communications and IR

Tel: +44 (0) 1223 275 300

Brunswick 

Jon Coles / Justine McIlroy / Annabel Entress

Tel: +44 (0) 20 7404 5959

  Chairman's statement

Overview

Since May 2007 when the Board appointed Acambis' new management team, Acambis has made a series of important advances, both in progressing its pipeline of innovative vaccines through the clinic and in securing its mid-term financial position. The most notable of these during the period were, in April 2008, finalising a $425m contract with the US Government for Acambis' ACAM2000® smallpox vaccine and, in May 2008, raising £40m (net of expenses) in a Placing and Open Offer priced at 115 pence per share. 

On 25 July 2008, the Boards of Acambis and Sanofi Pasteur Holding announced that they reached agreement on the terms of a recommended cash offer for the entire issued and to be issued share capital of Acambis by Sanofi Pasteur. The Board was able to assess Sanofi Pasteur's offer from a position of financial and operational strength, given Acambis' recent achievements. The Board believes the offer is fair and reasonable and is recommending the acquisition to shareholders. The offer document will be posted to shareholders shortly. 

Key events 

During the period, Acambis achieved a number of its key corporate goals.

On 23 April 2008, we announced that Acambis had been awarded a $425m (c. £212m), ten-year contract by the US Government agency, the Centers for Disease Control and Prevention (CDC), to provide it with a US-based warm-base manufacturing capability for Acambis' ACAM2000® smallpox vaccine. 

Of the $425m revenues expected to be generated under the contract, approximately two-thirds (c. $285m) relates to the delivery of doses in contract years three to ten and one-third (c. $140m) to licence maintenance activities. The CDC will purchase from Acambis a minimum of nine million doses of ACAM2000® per annum in contract years three to ten. The doses are procured on a fixed-price basis and make a significant net contribution to the business. In addition, throughout the term of the contract, we will undertake licence maintenance activities on a cost-plus-fixed-fee basis. This includes post-licensure activities and a bridging study, which are expected to generate revenues of around $70m in the first three years of the contract.

At the same time as awarding Acambis the warm-base manufacturing contract, the CDC ordered a further 1.7 million doses of ACAM2000® under Acambis' previous contract. This order is worth approximately $5m (c.£2.5m) and we expect to deliver doses during the second half of 2008. During the period, Acambis completed re-labelling as licensed material the 192.5 million doses of ACAM2000® previously supplied to the US Government's Strategic National Stockpile.

On 23 April 2008, we also announced a proposed fundraising of approximately £40m (net of expenses) through an underwritten Placing and Open Offer of 37,715,811 new ordinary shares at a price of 115p per share. This was successfully completed in May. 

Acambis has continued to make good progress with its Research & Development (R&D) vaccine programmes. 

On 3 January 2008, we announced positive data from a Phase 1 clinical trial and a pre-clinical challenge study with our ACAM-FLU-A™ vaccine. The trial results demonstrated that ACAM-FLU-A™ is well-tolerated and immunogenic, and the pre-clinical challenge study demonstrated that an M2e-based vaccine can protect against the H5N1 strain of avian influenza (bird flu), which is the focus of current pandemic concerns. We indicated at that time that we would explore the potential to partner this programme. Partnership discussions have been now been halted under the terms of the offer received from Sanofi Pasteur. 

In February 2008, we announced the start of pre-clinical trials with a herpes simplex virus (HSV) vaccine against genital herpes developed by Harvard Medical School. Pre-clinical studies had been conducted by Harvard Medical School and we are conducting further pre-clinical studies during 2008 and 2009 in preparation for submitting an Investigational New Drug (IND) application.

In March 2008, we announced that we had extended our licensing agreement with Sanofi Pasteur for ChimeriVax™-JE to include India and the Indian subcontinent, having mutually agreed with Bharat Biotech International Limited to terminate our existing agreement covering those territories. During the period, we also completed the transfer of the product lyophilisation process to Sanofi Pasteur and our partner initiated clinical trials in the endemic region for the paediatric indication, which is the target population for the vaccine. 

Board change

On 5 June 2008, we appointed Peter Allen to Acambis' Board as a Non-executive Director. Mr Allen is a Chartered Accountant and has extensive financial experience within the biotechnology and technology sectors. He is currently Chief Financial Officer of Abacus Group plc and was previously Chief Financial Officer of Celltech Group plc from 1992 until its acquisition by UCB in 2004, where he additionally held the role of Deputy Chief Executive Officer from 2003. 

Prospects for the second half of 2008 and risks

Acambis' goals for 2008 and the risks associated with those activities are summarised in Acambis' 2007 Annual Report. The following provides an update for the second half of 2008.

Acambis has previously identified the milestones it hopes to achieve with its vaccines pipeline during 2008. These include initiation of a proof-of-concept trial with ACAM-CDIFF™ in the fourth quarter and exploring the potential to partner the ACAM-FLU-A™ universal influenza vaccine. As highlighted above, partnership discussions associated with ACAM-FLU-A™ are not being continued under the terms of the offer received from Sanofi Pasteur. Work is on track to initiate the ACAM-CDIFF™ study on schedule in the fourth quarter.

In addition, we are nearing completion of a Phase 2 trial with ChimeriVax™-West Nile, from which we expect preliminary data shortly, and preparations are underway to initiate a further Phase 2 trial. We also continue to expect our partner, Sanofi Pasteur, will initiate an efficacy programme with the ChimeriVax™-based dengue vaccine. 

A detailed description of the risks associated with Acambis' business is available on the Company's website at www.acambis.com and is summarised in the 2007 Annual Report. 

Financial results

The financial results prepared under the Group's accounting policies based on International Financial Reporting Standards (IFRS) for the six months ended 30 June 2008 (H1) are presented below. The narrative reflects a comparison of our activities in 2008 and 2007, and, unless otherwise stated, the comparative figures in parentheses relate to the equivalent period in 2007. 

Trading results for the six months ended 30th June 2008

Revenue in H1 was £8.8m (2007 - £3.4m). The main sources of revenue were a payment from Sanofi Pasteur for extending the ChimeriVax™-JE agreement to include India and the Indian subcontinent, development work under the ChimeriVax™-West Nile partnership with Sanofi Pasteur and, for the US Government, relabelling stockpiled doses of ACAM2000® as licensed material. In addition, revenues continue to be recognised from milestones previously paid to Acambis by Sanofi Pasteur under the ChimeriVax™-JE and ChimeriVax™-West Nile agreements. Following the award of the ACAM2000® warm-base manufacturing contract in April 2008, activities under that contract were started during the period and some revenue has been recorded on that contract. 

Cost of sales in 2008 increased to £9.2m (2007 - £6.3m) and represents costs relating to the above revenue items and certain costs of operating our manufacturing facilities. These costs were higher in 2008 as they include activities associated with the ChimeriVax™-JE and the ChimeriVax™-West Nile programmes that were previously charged to R&D. These costs are now being shown within cost of sales following the partnership agreements with Sanofi Pasteur announced in February and November 2007, respectively.

A gross loss of £0.4m (2007 - £2.9m) was recorded for the six months. The gross loss in 2007 included one-off restructuring costs of £1.1m.

For the purposes of accurate comparison, the following paragraphs on operating costs exclude one-off restructuring costs totalling £2.9m that were recorded in the results for the first six months of 2007. 

Expenditure on R&D decreased in the period to £9.3m (2007 - £11.2m). The reduced level of spend in 2008 compared to 2007 is primarily attributable to the reclassification of costs to cost of sales, as described above, and ongoing savings from the restructuring. 

Administrative costs, which now includes all sales, general and administrative costs, were also lower at £2.4m (2007 - £3.2m), reflecting ongoing savings from the restructuring. 

Pre-tax loss for H1 was £12.2m (2007 - £19.3m) and we recorded a tax charge of £0.1m (2007 - £0.3m). 

Balance sheet highlights

 

 

Results for the six months ended 30 June 2008
Group income statement
	Six months ended 30 June 2008	Six months ended 30 June 2007	Six months ended 30 June 2007	Six months ended 30 June 2007	Year  ended 31 December 2007	Year  ended 31 December 2007	Year  ended 31 December 2007
	Total	Business performance	Restructuring costs	Total	Business performance	Restructuring costs	Total
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(audited)	(audited)	(audited)
	£m	£m	£m	£m	£m	£m	£m
Revenue	8.8	3.4	-	3.4	9.5	-	9.5
Cost of sales	(9.2)	(5.2)	(1.1)	(6.3)	(10.6)	(1.2)	(11.8)
Gross loss	(0.4)	(1.8)	(1.1)	(2.9)	(1.1)	(1.2)	(2.3)
Research and development costs	(9.3)	(11.2)	(2.0)	(13.2)	(22.1)	(2.0)	(24.1)
Administrative costs	(2.4)	(3.2)	(0.9)	(4.1)	(5.0)	(0.9)	(5.9)
	(12.1)	(16.2)	(4.0)	(20.2)	(28.2)	(4.1)	(32.3)
Finance income	0.4			1.0			1.4
Finance costs	(0.5)			(0.1)			(0.4)
Loss on ordinary activities before taxation	(12.2)			(19.3)			(31.3)
Taxation -  UK	-			-			0.5
Taxation - Overseas	(0.1)			(0.3)			(0.5)
Loss on ordinary activities after taxation	(12.3)			(19.6)			(31.3)
Basic and diluted loss per share (in pence)	(10.6)p			(18.2)p			(29.0)p
Weighted average number of ordinary shares in issue - basic and diluted	116,008,767			107,433,234			107,757,811

  

Group balance sheet as at 30 June 2008
	As at 30 June 2008	As at 30 June 2007	As at 31 December 2007
	(unaudited)	(unaudited)	(audited)
	£m	£m	£m
Non-current assets
Goodwill	12.4	12.4	12.4
Other intangible assets	2.0	0.8	2.0
Property, plant and equipment	15.5	14.1	16.2
Financial assets: available-for-sale investment	0.6	0.6	0.6
	30.5	27.9	31.2
Current assets
Inventory	1.2	1.6	1.2
Current tax assets	0.1	0.5	0.2
Trade and other receivables	3.4	2.2	7.7
Liquid investments	5.0	6.0	-
Cash and cash equivalents	44.6	24.8	20.9
	54.3	35.1	30.0
Current liabilities
Financial liabilities:
- short-term borrowings	(3.5)	(3.5)	(3.5)
- short-term financial liabilities	(0.1)	(0.1)	(0.1)
- derivative financial instruments	(0.2)	(0.2)	-
Trade and other payables	(1.5)	(1.0)	(3.1)
Accruals and deferred income	(9.1)	(5.2)	(10.8)
Income tax payable	(1.4)	(1.5)	(1.4)
Provisions	-	(0.5)	-
	(15.8)	(12.0)	(18.9)
Net current assets	38.5	23.1	11.1
Non-current liabilities
Investment in Joint Venture	(0.3)	(0.3)	(0.3)
Non-current financial liabilities	(1.2)	(1.2)	(1.3)
Deferred income	(4.1)	(2.6)	(5.2)
Liability for cash-settled share based payments	(0.4)	-	(0.2)
	(6.0)	(4.1)	(7.0)
Net assets	63.0	46.9	35.3
Shareholders' equity
Share capital	14.6	10.8	10.8
Share premium	134.4	98.2	98.2
Other reserves	(3.0)	(2.9)	(3.1)
Retained earnings	(83.0)	(59.2)	(70.6)
Total shareholders' equity	63.0	46.9	35.3

  

Group cash flow statement
	Six months ended 30 June 2008	Six months ended 30 June 2007	Year ended 31 December 2007
	(unaudited)	(unaudited)	(audited)
	£m	£m	£m
Operating activities
Loss on ordinary activities before tax	(12.2)	(19.3)	(31.3)
Depreciation and amortisation	1.4	1.5	2.9
(Increase)/decrease in working capital	(0.1)	14.7	19.4
Other non-cash movements	0.3	0.9	1.4
Net finance costs	0.1	(0.9)	(1.0)
Taxes paid	-	(0.5)	(0.3)
Cash flows used in operating activities	(10.5)	(3.6)	(8.9)
Investing activities
Purchase of intangibles	-	(0.1)	(1.4)
Purchase of property, plant and equipment	(0.7)	(1.4)	(4.8)
Cash flows used in investing activities	(0.7)	(1.5)	(6.2)
Financing activities
Interest paid	(0.2)	(0.3)	(0.4)
Interest received	0.3	0.9	1.4
Proceeds from issues of shares	43.3	0.3	0.4
Share issue costs	(3.3)	-	-
Repayment of borrowings	(0.2)	-	(0.1)
Purchase of liquid investments	(5.0)	(1.0)	(5.8)
Sale of liquid investments	-	2.5	13.3
Cash flows from financing activities	34.9	2.4	8.8
Increase/(decrease) in cash and cash equivalents	23.7	(2.7)	(6.3)
Net foreign exchange difference	-	0.7	0.4
Cash and cash equivalents opening balance	17.4	23.3	23.3
Cash and cash equivalents closing balance (note 8)	41.1	21.3	17.4

  

Reconciliation of movements in Group shareholders' equity
	Six months ended 30 June 2008	Six months ended 30 June 2007	Year ended 31 December 2007
	(unaudited)	(unaudited)	(audited)
	£m	£m	£m
Retained loss for the period	(12.3)	(19.6)	(31.3)
Gain/(loss) on foreign currency exchange	0.1	(0.1)	(0.3)
Debit/(credit) in respect of employee share schemes	(0.1)	1.2	1.5
	(12.3)	(18.5)	(30.1)
New share capital subscribed	43.3	0.3	0.4
Cost of share issue	(3.3)	-	(0.1)
Net increase/(decrease) in shareholders' equity	27.7	(18.2)	(29.8)
Opening shareholders' equity	35.3	65.1	65.1
Closing shareholders' equity	63.0	46.9	35.3

 

Notes
1.	General information
The Company is a limited liability company incorporated and domiciled in England and Wales. The address of its registered office is Peterhouse Technology Park, 100 Fulbourn Road, Cambridge, CB1 9PT.   The Company has its primary listing on the London Stock Exchange.   This condensed consolidated interim financial information was approved for issue on 6 August 2008.   This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985 (section 434 of the Companies Act 2006). Statutory accounts for the year ended 31 December 2007 were approved by the Board of Directors on 23 April 2008 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 237 of the Companies Act 1985 (section 498 of the Companies Act 2006).
2.	Basis of preparation
This condensed consolidated interim financial information for the six months ended 30 June 2008 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and IAS34, ‘Interim financial reporting’. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2007, which have been prepared in accordance with IFRSs.
3.	Accounting policies
Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2007, as described in those financial statements.   The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2008 but are not currently relevant for the Group:   IFRIC11, ‘IFRS2 – Group and treasury share transactions’. IFRIC12, ‘Service concession arrangements’. IFRIC14, ‘IAS19 – the limit on a defined benefit asset, minimum funding requirements and their interaction’.   The following new standards, amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2008 and have not been early adopted:   IFRS3 ‘Business Combinations’ (Revised) requires that all transaction costs are expensed and that all consideration is fair valued at the acquisition date with some contingent payments subsequently being remeasured to fair value through the income statement. This standard has not impacted the Group’s results as it is applicable for business combinations on or after 1 July 2009. IFRS8 ‘Operating Segments’ replaces IAS 14 ‘Segment Reporting’ and aligns segment reporting with the requirements of the US standard SFAS 131 ‘Disclosures about segments of an enterprise and related information’. The new standard uses a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. The Group will apply IFRS8 from 1 January 2009. The impact of this new standard is not expected to result in a material change to the disclosure of segmental reporting. IAS23 ‘Borrowing costs’ (Revised) removes the option in the original IAS23 of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. The expected impact is not thought likely to lead to a material adjustment given the Group’s level of borrowings. The Group will apply IAS23 (Revised) from 1 January 2009, subject to endorsement by the EU. The amendment to IAS 1 ‘Presentation of financial statements’ requires three balance sheets (at the end of the current period, the end of the comparative period and the beginning of the comparative period) to be reported if there has been a prior period adjustment. Certain other presentational changes of the income statement and statement of total recognised income and expenses are also required. The Group will apply this amendment from 1 January 2009 subject to endorsement by the EU. This standard is not thought likely to lead to a material change in the presentation of the Group’s results. IAS27 ‘Consolidated and separate financial statements’ (Revised) requires the effect of all transactions with non-controlling interests to be recorded in equity if there is no change in control. This standard is not expected to impact the Group’s results significantly.
4.	Contingent liabilities
The Group’s US subsidiary, Acambis Inc., is currently undergoing a tax audit by the Internal Revenue Service for the years 2003, 2004 and 2005. The IRS issued its report in January 2008 but, owing to the complexity of certain issues including the Group’s intercompany transfer pricing, the Group expects that this process will continue during 2008. Where the tax exposure can be quantified, the Group has made provision in its accounts for liabilities, including interest, expected to arise as a result of enquires by the tax authorities, although the final liability may vary from the amount provided. While the Group believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could be greater than its accrued position. Accordingly, additional provisions on US federal and state tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved. An estimate has also been made of the amount of tax that is expected to be recoverable from the UK tax authorities as a result of the expected changes to amounts chargeable to tax in the US and UK tax jurisdictions. Given the commercial sensitivities surrounding the tax audit’s findings, the estimated net amount payable to the authorities has been included within income tax payable rather than being disclosed separately.
5.	Segmental information
Acambis’ primary reporting format is business segments and the Group is organised in one business segment of vaccines. Therefore, no segmental information is included.
6.	Major share issues in the period
During the period, 37.7 million shares were issued at 115 pence, raising £40.0 million net of expenses.
7.	Post Balance Sheet event
On Friday, 25 July, Sanofi Pasteur Holding (Sanofi Pasteur) and Acambis plc announced that they have reached agreement on the terms of a recommended cash offer for the entire issued and to be issued share capital of Acambis by Sanofi Pasteur. Under the terms of the proposals, each shareholder will receive 190 pence in cash for each share held at the scheme record time. It is intended that the proposed acquisition will be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.
8.	Cash, cash equivalents and liquid investments

 

	As at 30 June 2008	As at 30 June 2007	As at 31 December 2007
	£m	£m	£m
Cash and cash equivalents	44.6	24.8	20.9
Bank overdrafts	(3.5)	(3.5)	(3.5)
	41.1	21.3	17.4
Liquid investments	5.0	6.0	-
Total cash and liquid investments	46.1	27.3	17.4

Liquid investments comprise amounts held on deposit with an original maturity of more than three months.

  Independent review report to Acambis plc

Introduction

We been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008, which comprises the Group income statement, Group balance sheet, Group cash flow statement, reconciliation of movement in Group shareholders' equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
6 August 2008

Cambridge

Notes:

 

ENDIR BUGDIXDGGGIL